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What Will Comcast's Fox Offer Mean For Hulu?

With Comcast and Disney now both
bidding for control of much of 21st Century Fox’s assets, the future of one of the largest streaming video services is at stake.

Hulu -- which was founded by the broadcast networks
in the wake of Netflix and YouTube -- counts Disney, Comcast and Fox as 30% stakeholders, and Time Warner (soon to be owned by AT&T) as a 10% stakeholder. If Comcast’s superior bid for Fox
prevails, it will become the majority owner of Hulu. If Disney prevails, it will control the service.

Hulu has quietly become one of the most significant streaming services in the
industry. With more than 20 million subscribers, it trounces most of the other streaming services. Only Netflix, with more than 55 million U.S. subscribers, has a clear lead (Amazon does not break out
how many off its Prime subscribers watch Prime Video, so we don’t know how popular it is).

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Unlike Netflix and Amazon, Hulu is in the advertising business, doing well over $1
billion in advertising last year, and on track to grow this year.

Disney had made it clear that it sees Hulu as a key part of its direct-to-consumer strategy. On a conference call
outlining its plans for Fox, Disney CEO Bob Iger outlined a DTC strategy that saw the upcoming Disney-Branded service as an option for families, and Hulu as a “more adult-oriented”
option.

“We believe that Hulu is a great opportunity to expand in the DTC space, and having control of it will enable us to greatly accelerate Hulu into that space, and
become an even more viable competitor to those out there,” Iger said at the time.

As a condition of its acquisition of NBCUniversal, Comcast has had to recuse itself from
getting involved in making management decisions at Hulu. However, those conditions are set to end this year, and executives at the company sounded bullish on Hulu’s future on their conference
call about the proposed Fox transaction.

“We think Hulu is a great business and has great prospects, and think we can and should own it and expect to do so,” said
Comcast CFO Michael Cavanagh. “It would create value for us to have it, and we would love to have it.”

Comcast CEO Brian Roberts went one stop further, saying that Hulu was a
“very important part of this deal.”

He added: “We have invested hundreds of millions of dollars in Hulu to try and build it into a robust competitor.”

Of course, that doesn’t necessarily mean Hulu will become a Comcast OTT service, should the cable giant win control of Fox. According to Recode’s Peter Kafka,
Comcast would be willing to divest Fox’s 30% stake in Hulu—ceding control of the streaming service—should regulators require it to do so.

In other words, Hulu
now faces three potential futures: a world where Disney or Comcast own and control it, or a variation of the status quo, with multiple companies each getting a say in how it operates.